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Disadvantages of health insurance exchanges

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Published: Mon, 5 Dec 2016

Health Insurance Exchanges form the main provisions proposed under the Patient Protection and Affordable Care Act by the president Obama’s administration. These are forms of standardized and state regulated healthcare plans whereby each individual is expected to purchase health Insurance entitled for federal subsidiaries. These plans were proposed by the Obama administration as a move of promoting healthy and cost-efficient competition among insurance firms, consumer protection compliance by insurers, and expansion of health services to cover masses regardless of their class or economic capabilities. Exchanges were introduced to ensure that there is absolute accountability and transparency among the insurance firms, ease the process of enrollment and delivery of financial support, and also ensure that health risks are spread considerably instead of leaving this responsibility to one individual or a small group of individuals. Incase an individual’s health needs are high; Exchanges would ensure such a risk is not bared by the sufferer alone or those around him/her, but the large American community would share a considerable amount of such a risk (Garey & Lorber, 2008). Importantly though, exchanges are not insurers, they are just discharged with the responsibility of ensuring insurance companies are participating in them without bearing any risk themselves.

Although these Exchanges bear the promise of a federally financed health where those who financially challenged may enjoy returns unavailable to private health insurers, it came under much criticism from oppose who pointed out the resemblance of such plan to California and Texas exchanges which failed terribly (Furman, 2008). Also noted by critics is the restricted eligibility of this plan which could lead to raised premiums, forced clearance of exchange and enhanced cases of specific people’s coverage due to nature of market share (the market share is too small). United States have for a long time desired reformed health care coverage that is more suited to the citizen’s needs and caters for the needs of the minorities and the disadvantaged. Health insurance exchanges were among the few proposed strategies for the consideration of Senate and the House of Representatives that had a strong backing from the government and the Obama’s administration.

Background

Health insurance has been in the political headlines since early to mid 20th century. It is still remain an active issue, subject to rife debate even in the current congressional session under Healthcare reforms. Efforts of the federal government to provide health care to the all or part of the United Citizens date back to the 19th century when the Bill for the Benefit of the Indigent Insane was proposed and passed by both houses. Although it was not passed by the president, who claimed that it fell on State’s social obligations and therefore it did not warrant the attention of the federal government, it laid a strong base for the debating ground on healthcare and whose responsibility it was to provide health insurance to the disadvantaged. From then, different presidents have laid down procedures and efforts to obtain public funded health care with no or little positive results. Notably, Roosevelt’s health care plan was thwarted by the America Medical Association when he tried to include it in the Social Security Legislation. He ended up withdrawing the plans due to the fear of organized opposition. The same case happened to Harry Truman (Gonzalez, n.d.). The requirements of the Fair Deal after the second World War included proposals for a Universal Healthcare. That part of the Fair Deal was stopped by extensive opposition however, the National Mental Health Act was passed in 1946 and in the same year, the Hill-Burton Act signed.

The bigger steps in the provision of federal universal health care were realized by President Johnson when the Medicare and Medicaid programs were brought into action in the year 1965. Medicare provided insurance coverage only to those who are 65 years of age or more but they had to meet a certain criteria to be held legible. This Social insurance program was administered by the federal government. This policy also provided a reservation for the residency training programs for majority of doctors in the United States. It is funded by specific taxes and currently, there are no compensation limits for paying some of the associated taxes. Medicaid on the other hand is a health program that covers only the families and individual from low income and limited resources background (this is the main criteria for eligibility). This program is exclusively run by the state governments but obtains its funds both from the states and the federal government. Poverty alone does not qualify any individual to receive coverage from this program. It encompasses some eligible United State’s citizens, people with disabilities and some low income earners and their children. It is the main source of funding covering these groups of people in the United States (Gonzalez, n.d.). These two programs are included in one umbrella body, CMS (Centers for Medicare and Medicaid Services). Positive results regarding health care were obtained in 1985 when the ERISA act was amended to allow employees the right to continue enjoying Health Insurance coverage even after seizing to be employees of any organization. The same results were obtained in 1997 when SCHIP (State Children’s Insurance Program) was established allowing provision of health to children from those families that occurred on or below the 200 percent of the federal poverty line.

Reform debates featured prominently in the 2008s presidential elections whereby the major two presidential candidates had to declare and support their stand regarding their position on health care. Either Open market or public funded entities were the main proposals in these debates. Presidential aspirant J. McCain proposed a more open market oriented program where competition would shape the outcomes, but also included some tax credits to be allocated to families and individuals who did not have access to health care via their employers or generally who did not subscribe to the program (Robert & Owcharenko, 2008). Obama’s plan was based o a government run option he termed Universal Health care that combined Medicare-like government run programs with private insurance firms. His proposal required payment of premiums without upholding the health status of the insured and would also require all parents to have their children covered. Importantly, this proposal advocated for rigid government involvement and support in different aspects of the healthcare. These two proposals were based on two different philosophical focuses with McCain’s plan focusing on provision of affordable insurance coverage while Obama was focusing on availing health insurance to more people.

The year 2009 was characterized by extensive debates on health reforms where by the stake holders focused on addressing unsustainable growth and waste in the contemporary healthcare market. Reforms included the setting of expectations and standards in the quality and safety of diagnostics, patient centered care, promotion of coordinated care, introducing a link between the payment of health services and the quality obtained, bundles payments for individuals with chronic infections, and availability of fixed rates for acute care episodes that are all inclusive and average in payment among other reforms; all aimed at giving enhanced patient experiences, obtaining better clinical outcomes and in overall lowering the cost of care.

The senate’s Finance committee deliberated on Health care reforms in a panel that invited stakeholders like Industry panelists and Republican senators who debated and agreed on the inefficiency of any kind of expanded healthcare coverage. These conclusions were however protested by doctors in these sittings (Austin, Thomas, Library of Congress, & Congressional Research Service, 2010). Consequently, the most important issues table to the House of Representatives was the possible establishment of an insurance plan by the government to compete with the private firms and whether the comparative effectiveness research was a valid means of containing the costs incurred by the public suppliers of health care.

The 2010 reforms that were spearheaded by the Obama’s administration were accelerated not only by the previous election’s campaign promises, but also by the need realize the idea health coverage by the U.S citizens that could match up with the other developed nations and also parallel international standards. President Obama outlined the important elements that necessitated the adoption of a new health care system, such element that should drive the Congress into passing this bill. He named extended coverage through insurance mandate as a key mover of these reforms. The law will require a hastened process that will be completely in effect in just four years time expanding the eligibility of Medicaid’s beneficiaries to encompass people making up to 133% of the FPL. Insurance will also be highly subsidized for individuals who are financially challenged and this will include a system of providing incentives to businesses to enable them provide healthcare to their employees, establish policy prohibiting the forfeiture of coverage and also set up Health Insurance Exchanges and offer advanced support to medical research (Buss, Paul & Water, 2009). The specific measure stipulated in this bill are many and are all aimed at reducing the population of uninsured people through government efforts and by sourcing the funds from those who already have to cover the uninsured. What this policy insisted was no target the poorest and the sickest so that they do not suffer most. The administration put into consideration that to achieve this, they need to provide mechanisms that allowed more health people to join health insurances and therefore provide means of helping those in dire need fore these medical services. It is a strategy of making health insurance compulsory instead of voluntary. Based on different studies conducted by various authorities, it was revealed that excess death caused by lack of insurance cover have reached some alarming figures of more than 44,800 death individuals annually.

This law was also aimed at making health insurance more efficient by preventing exclusions of any kind and encouraging all elements of necessary care like immunizations and screening to be covered by the insurance firms excluding annual and life times caps. Although some of these were proposed to be put into effect by 2014, the current effects include reservations by the government that ensures that no more than 15% in insurance premiums goes to the insurance company’s overheads. This law also declares some health benefit schemes and insurances completely inadequate.

Another advantage cited for Healthcare Insurance Exchanges is the elimination of the overpayment occurring in Medicare advantage. Regulations will ensure that Medicare is in a no position to overpay the insurance companies therefore saving huge amounts of money. The need to reduce the deficit was also another important mover of health care reforms. Congressional budget office estimated a highly reduced deficit for the following 10 years (Shi & Singh, 2009).

The law is also set to improve the treatment of insured by the insurance companies illegalizing rescinding of policies due to minor errors made in insurance application, setting out black-out interludes, increasing premiums for sicker clients, or the imposing of any special conditions not favorable to the applicants.

Solution

The Health Insurance Exchange was proposed as the ideal solution to these health problems. The establishment of these exchanges was passed under the Patient Protection and Affordable Care Act in 2010 that required all states establish their own exchange in accordance with the bill enacted by the United State’s senate. This was not the original intention of the House of Representatives as it intended to have a unified exchange. The split exchanges were however okay and all states were required to charter insurance exchanges that will act as clearing houses where insurance companies would compete to offer the ideal or portable insurance plans within a framework of uniform insurance rules and standardized administrative procedures. This may be viewed on the basis of stock exchange that provides the platform for offering transactions putting into place or the regulations and venues but not in itself selling any stock to anyone. Based on the stipulations of this exchange, every state would formulate its guidelines as the infrastructure for accepting insurance firms into the exchange and also formulate requirements and regulations for handling premiums. Other responsibilities of the state would include determination of the reinsurance, pooling, risk adjustments and the degree each firm would offer plans through this exchange to their employees. Basically, the functions of the exchange will be the provision of information to the employees, aggregation of the premiums and distribution plans, implementation of the state insurance framework, and making plans available. The families will only be required to choose their plans while the employers will be required to send premiums to the exchange, make employees’ payroll deductions, and may also add any other form of financial contribution.

Although any state is in a position to establish Exchanges without the regulation or guidance from the federal government, institutionalizing this will mandate each State to have such Exchange. Exchanges are important as they act as payment aggregator and also as the market organizer. Another advantage of these exchanges is the ability to be integrated with the federal governments’ employee benefit law.

In order to ensure the success of these state Exchanges, they must find ways of sourcing funds and minimizing their administrative costs. Currently, the federal government disburses funds to the states but there is need for all these states to develop their own sources of revenues in order to offer consistent services. The federal government through Health and Human Services (HHS) announced its intention to offer grants to the states pursuing the development of health insurance Exchanges. The reform law requires that all states have well developed and managed Insurance exchanges and if facing any difficulties, they may invite the federal government to run them for them. All states were given $1million as the initial disbursement that is supposed to be invested in establishing infrastructure and ensure readiness of IT systems and online health Insurance exchanges. HHS administrations announced the will and wish to provide more grants especially to the states that have already set down processes and procedures of achieving and sustaining the momentum of these efforts.

Health and Human Services recognized the efforts being put by each state in to establishing these Exchanges and promised to offer help at any level the states are in. the ultimate goal will be realized by achieved the reform’s reality of getting a one-stop health services (Stoltzfus Jost, 2010). The initial grant’s purpose was to establish infrastructure and appropriate Information Technology capacity while subsequent grants will be utilized to put up a governance structure, put up necessary mechanisms of preventing abuse, fraud and wastage. Every exchange will also be needed to have well described consumer assistance; sustainable and efficient enough with effective call centers. More funds will be obtained from the insurance companies and employers who will be paying for their employees premiums. These will offer enough operational costs.

Support or refute the solution

The United States has been in the fore front in the introduction of cutting age technologies that is later adopted and utilized by other nations. This means that U.S. is subsidizing health care in other countries indirectly. This country also hosts a big number of immigrants, both legal and illegal unlike the other advanced nations. The cost of covering for these illegal immigrants is expected to be catered for by American citizens therefore escalating the total cost of providing health services. This make the middle class American get wary of paying additional taxes under the auspices of the federal government to expand the provision of medical service (Buss, Paul & Water, 2009).

Another factor not necessarily addressed is the popular belief that health insurance may be equated to access to medical services. United States does not possess enough health professional to actually cover all the Americans and such a move will be accompanied by respective deterioration of medical care. If no proper checks are done, the medical services will be highly or over utilized especially if no adjustments are made periodically.

The shortcomings of these Exchanges are not few. This insurance plan doest not solve the problem of Tax inequity and will even worsen the current condition. This plan is also being suspected to be a means promoting the erosion of Coverage especially to those who already covered and are receiving benefits from their employers (Holtzblatt, 2010). Another shortcoming is the fact that this policy is perpetuating a pluralistic and complex insurance system that lacks integration and fails to address problems of cost shifting, gaps in coverage and turn over in overall health coverage. Being a new policy, there is less to learn from the other states and each state may only be limited to establishing their own mechanisms. Scrutinizing the nature of the application of these Laws, it is evident that there are conflicting realities between cost and coverage.

Based on this facts and inconsistencies, this solution is refutable and is therefore a subject to more deliberations and planning. The stakeholders should therefore refocus their efforts and diversify the overall goals and intentions of this law to encompass parallel services that go hand in hand with the provision of universal healthcare.

Benefits/consequences

Possible advantages to individuals include the portability associated with this policy include its transferable nature when you change employers, the existence of different choices of insurance plans and companies, and the fact that premiums are covered with pretax money. Employers will also enjoy some advantages from this policy. They will experience decreased administrative costs especially the burden of administering and selecting group coverage for the workers (Chambless, 2007). The employers will also enjoy a form of tax withholding system and therefore have a minimized role in making payments to different insurance companies. The employers will also have the freedom to subsidize their premium costs to the employees. This amount will be a fixed or predetermined cost therefore avoiding the risks associated with self-insured plans.

Conclusion

Given the current state of the implementation of this policy, United States is in a position to achieve a milestone in achieving the best health service to its citizens. Difficulty issues are expected to arise in implementing this program. Some expected barriers will be in terms of governance of these Exchanges, and the use the exchanges’ authority among others. The government should therefore instill measures of solving and dealing with these difficulties as well as establishing parallel development plans to cater for structural and infrastructural challenges arising from implementation of this policies. Holding these challenges and shortcomings constant, these heath care reforms are quite promising and the United States will be placed in a better position of meeting future challenges, and establishing a society that is based and united on equality upholding the value of human life under all circumstances.


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